What is the Difference Between Mediation and Arbitration?

Few people ever welcome the idea of taking a dispute to court. A formal hearing can be very expensive and time-consuming, and one side may find themselves devastated by a judge or jury's ruling. For this reason, many people try to resolve legal disputes two methods — mediation and arbitration. Although both of these efforts have the same goal in mind, a fair resolution of the issues at hand, mediation is typically a little less formal than arbitration, is almost never binding. What actually happens in mediation meetings is often different than what happens in arbitration as well.

Mediation of a dispute involves using a neutral third party to act as a guide or negotiator. This person may or may not be a legal professional, although a number of legal firms do offer mediation services as an alternative to court. A trained mediator agrees to hear both sides of a dispute objectively, but the main focus remains on the two parties as they work towards a mutually beneficial solution. During sessions, the mediator often meets with each side privately, then schedules face-to-face meetings.

Arbitration, on the other hand, is generally more formal than mediation. An arbitrator could be a retired or active judge, or a very experienced attorney. During sessions, both parties are given an opportunity to explain their positions in front of the arbitrator. Much like a regular court proceeding, attorneys can also question witnesses from both sides. During arbitration, there is usually little if any out-of-court negotiations between parties. The arbitrator has the power to render a legally binding decision which both parties must honor.

During mediation proceedings, the mediator can render opinions on the best course of action, but often tries to get the parties involved to make a mutually agreed settlement themselves. The mediator's suggestions may be based on legal principles, but his or her opinions are not considered legally binding. In the most traditional forms of mediation, the mediator will typically not offer an opinion. This often works best in civil disputes, such as landlord and tenant matters or divorce proceedings. Arbitration is usually reserved for more complicated legal disputes, such as labor and management contract negotiations and product liability issues, though it can sometimes be non-binding as well.